When the South African Revenue Service ("SARS”) audits your tax affairs, your life changes.Instead of being able to focus your energies on your job or your business, you are now tasked with having to deal with various requests for information and documentation from the relevant SARS auditor.This can be a very time-consuming exercise, and may often involve third parties such as your attorney or accountant. The usual approach is to give SARS what they want so that they can just go away.It is not, however, that easy.
It must be remembered that the goal of any audit by SARS is to verify your tax affairs with the further hope of raising an assessment should your tax affairs not be in order.As this unforeseen event may result in a risk to you or your business, it is important to give a SARS audit the attention it deserves.
An audit into your tax affairs will usually start with a request for information and documentation which relates to certain tax years.A deadline is given for the provision of this information and documentation, which, usually, under the circumstances, is insufficient.At this point, it should be considered whether or not professional advice is required to assist with the audit with due regard to your specific circumstances as known to you.
Not many people are aware of the fact that when commencing an audit, SARS may simultaneously conduct a criminal investigation, which may, depending on the findings under the audit, result in a criminal prosecution further down the line where you may stand accused for contravening the relevant tax laws, or even worse, common law fraud.To complicate matters even more, an audit may only become a criminal investigation after SARS has been provided with all the requested information and documentation requested for purposes of the audit.With the proper legal representation, it may be ensured that any information and documentation which is given to SARS is given under the compelling provisions of the applicable tax laws and therefore does not amount to the waiving of the privilege against self incrimination. It may then be argued that any evidence gathered by SARS in this manner should be inadmissible for the purposes of a criminal action against you, as it was given under compulsion.
Once SARS has completed its audit, you are entitled to receive a letter of findings in respect of the audit prior to the raising of any assessment.A procedural remedy may be available should an assessment be raised without a letter of findings first being issued.A further investigation is however necessary depending on the circumstances of the matter.Once in possession of this letter of findings, great care should be taken in responding thereto.Don’t dismiss it lightly.Do your homework at this stage. Remember that you, in any event, may be required to do so should an assessment be raised and an objection be required.The benefit of properly responding to a letter of findings lies in the fact that it may be possible to limit the issues in dispute and thus avoid a large assessment from being raised.It is strongly suggested that you present your response to the letter of findings to the relevant SARS auditors so as to ensure that they properly understand your response.This also creates the environment where any queries can quickly be resolved.
After considering your response to the letter of findings, SARS may raise an assessment to which you are entitled to request reasons for the assessment.It must be stressed that this is extremely important and that these reasons be obtained as this will greatly assist in formulating the grounds of objection to the assessment.Furthermore, the time period within which an objection must be lodged will be delayed until SARS provides such reasons.This creates the opportunity for you to timeously gather all information and documentation which you may require for the purposes of formulating the grounds of objection.Carefully check the reasons once they have been provided by SARS so as to ensure that SARS has based its decisions on concrete evidence obtained through the audit process and not merely on inferences or speculation.Should any decisions by SARS be based on inference or speculation, this may constitute a further ground of objection.
If you have not already obtained any professional advice, it is strongly suggested that you do so when considering objecting to an assessment.It is surprising to note the poor quality of objections that are submitted on behalf of taxpayers.The objection is of utmost importance and can be compared to a pleading in a civil trial.
The objection must deal with the facts and the law and state the grounds of objection in detail.Certain administrative documentation also needs to be completed and attached to the objection so as to ensure that the objection is valid.Very importantly, an objection must be lodged within 30 business days of an assessment or within 30 business days of reasons being provided by SARS for the assessment, should such reasons have been requested.If the objection is not timeously filed, an assessment becomes final and binding unless condonation is granted by SARS, which is not that easy to obtain.It is well worth the time and money spent in obtaining professional advice and assistance in formulating the grounds of objection.
Before you know it, SARS’ collection department will be calling you requesting payment on the assessment and threatening all kinds of legal and recovery steps should payment not be made.Herein lies a risk as SARS may attach funds in your or your business bank account and any payments owed to you or your business by debtors. In the blink of an eye, you or your business could be sitting without any cash flow, which needless to say, could be detrimental.It is, therefore, of utmost importance to put forward a request for suspension of payment under the assessment pending the adjudication and finalization of the disputes, which request SARS is duty bound to consider.All relevant facts and documentation must be provided to SARS so that they can properly consider this request.SARS may even call for security to be provided.In the event of suspension of payment not being granted by SARS, it is also possible to put forward a "without prejudice” payment proposal in terms of which payments are made to SARS under the assessment, without admission of liability.At least in this way you are able to ensure that the process is managed going forward.
Where SARS disallows an objection, often reasons are not provided in such a dis-allowance.Every effort should be made to obtain such reasons by relying on the rules of administrative justice as entrenched in the Promotion of Administrative Justice Act 3 of 2000 and the Constitution of the Republic of South Africa.These reasons may be of great assistance in dealing with the matter going forward and specifically in deciding whether or not to lodge an appeal.
Where an objection is disallowed the further process could include Alternative Dispute Resolution or an appeal to the Tax Board or Tax Court.It should be borne in mind that the audit or review of your or your business tax affairs may take some time to complete and the best advice to be given is that the matter should be entrusted to professional advisors, so that your energies can be focused on your job or your business.With SARS being more aggressive in their approach to ensure tax compliance, the days of discussing the matter with the SARS auditor over a cup of coffee are gone.SARS has skilled lawyers and accountants in their employ.It is important to level the playing field to ensure that your rights are protected and that you do not pay more than your fair share.
As SARS is the largest creditor of any business, which also poses a great risk to the continued existence of your business, it is important to properly deal with a SARS audit and to properly understand the process.
Source: By Gavin Goërtz (TaxTALK)